Assignment

INSTRUCTIONS

You are a staffer for a federal Senator. She is an independent (not Republican nor Democrat) and will introduce a bill to change the U.S. Healthcare System. She requested your analysis of the bill.

The Senator believes that her bill will make the U.S. Healthcare System more: (1) "Efficient," and (2) "Equitable" (as defined in Chapter 34). She also believes that the bill will: (3) Reduce the use of unnecessary health services and improve the population's health, (4) Control federal and state health spending, and (5) Increase competition and reduce health costs for individuals.

Please address assumptions (1) - (5) in your analysis but limit your discussion to 2 pages per assumption. Use the following format: Word file, Single-spaced, Times New Roman font, Size 12, and include your name in the header. The Senator is very particular about page limits and formatting and will NOT review or consider comments that do not comply with the formatting or exceed the page limit.

The Senator made it clear that your task is NOT to give your opinion on whether the bill is "fair" or "unfair." Instead, the Senator wants an unbiased and objective analysis about the impact of the policies. You can rely on any of the information covered during the semester and on other sources as long as the sources are reliable and they are cited. Information on how stakeholders (e.g., voters, insurance companies, providers) will react to the bill will get you "extra points" with the Senator.

Below is the Proposed Bill that you will used to answer the assumptions and the paper layout.

(1) How will the bill make the U.S Healthcare system more "Efficient,"
(2) How will the bill make the U.S Healthcare system more "Equitable" (as defined in Chapter 34).
(3) How will the bill make the U.S Healthcare system more reduce the use of unnecessary health services and improve the population's health.
(4) Control federal and state health spending.
(5) How will the bill make the U.S Healthcare system more increase competition and reduce health costs for individuals.

1. Efficient

2. Equitable

3. Reduce Unnecessary Services and Increase Population Health

a. Reduce Unnecessary Health Services
b. Increase Population Health

4. Control Federal and State Spending

a. Control Federal Spending
b. Control State Spending

5. Increase Competition and Decrease Cost for Individuals

a. Increase Competition
b. Decrease Cost for Individuals

PROPOSED BILL

(1) The following programs/options will be eliminated or prohibited:

a. Medicare.
b. Medicaid.
c. Self-funded employer insurance.
d. Any use of pre-tax dollars to pay for any type of health insurance.

(2) To substitute the aforementioned programs/prohibitions, the federal government will create:

a. The National Fund (Fund): This pool of money will be funded by:

i. Income taxes;
ii. Progressive payroll taxes; and
iii. Contributions from each states based on the state's historic Medicaid expenditures. The state can raise these funds through any means (e.g., state income taxes, sales taxes).

b. Essential Health Benefit (EHB) plans:

i. The federal government will not run the insurance plans. Instead, the federal government will establish an EHB service packet that all private insurance plans must cover (e.g., preventive and other services).

ii. EHB plans must comply with the following requirements:

1. Insurers cannot reject applicants (e.g., no pre-existing condition policies). Assume that healthy and unhealthy individuals are evenly distributed among the different plans (e.g., no "cherry-picking" by plans).

2. Cost-sharing for preventive services (e.g., annuals, mammograms) is prohibited.

3. The insurer cannot place lifetime limits on costs related to EHB services.

4. The insurer cannot drop individuals from the plan (assume all individuals will comply with monthly premiums and cost-sharing if needed).

5. The insurer can charge as much as it wants for the EHB plan. However, cost differentials for individuals within the same insurer are limited to the following factors: age (3:1 ratio), geographic location, and tobacco use. Furthermore, variations in cost associated with these factors will be limited (e.g., some percent of the average cost of the insurer's plan) to avoid the insurer from engaging in cherry-picking.

6. All plans will operate as HMOs.

7. All plans must include value-based provisions in the reimbursement system to providers.

c. The National Exchange (Exchange):

i. Private plans must comply with the EHBs to be sold in the Exchange and insurance companies cannot sell EHB plans outside the Exchange.

(3) This is how the federal government will operationalize the Fund, EHB plans, and Exchange:

a. Every individual will be legally required to have an EHB plan (assume all individuals will comply). The individual can select any private insurer in the Exchange.

b. Using money from the Fund:

i. The federal government will subsidize the cost of EHB plans. The subsidy (premium and other cost-sharing) will depend on the individual's income (e.g., the lower the individual's income the higher the subsidy and vice versa), age, and geographic region. The government will pay for the full plan for some (e.g., the poor, individuals with disabilities, those formerly in Medicaid). In turn, even with a subsidy, others will pay part of the cost (e.g., high-income earners). Individuals who pay part of the cost can obtain a tax-deduction for such expenses.

ii. Because the government is not regulating the prices of the EHB plans but it is subsidizing part of the cost of insurance for the individual, the government will cap the subsidy solely based on the individual's income, age, and geographic region. The subsidy will not change if the individual chooses a cheaper or more expensive EHB plan.

iii. The government will provide higher subsidies if the individual complies with preventive services (e.g., annual checkups). However, the government will not provide higher subsidies (irrespective of the individuals' income) for premium increases associated with tobacco use.

(4) Add-on Insurance Policies:

a. Individuals can purchase additional insurance coverage on top of the EHB plans by purchasing an Add-on policy. Individuals cannot buy an Add-on policy unless they have an EHB plan. Individuals can only deduce up to $1,500 in taxes for Add-on policy expenses.

b. Besides the prohibition in (1)c and (1)d (above), the government will not subsidize Add-on policies.

c. In order to sell Add-on policies, the insurer must offer an EHB plan.